Going Backwards

On the surface, it looked like one of those trends that would continue forward. As the ag retail industry entered the 21st century, one of the major buzzes among market watchers was the rapid rise of post-patent products and their eventual impact on the basic suppliers. Indeed, some analysts such as Harvest Consultant and Mike Buckley & Associates were speculating that by the end of 2007, post-patent products would make up approximately 80% of total crop protection product sales.

Given these projections for growth, CropLife® magazine was curious. Be­ginning with the 20th anniversary of our CropLife 100 survey in 2003, we started asking how many ag retailers within the CropLife 100 rankings were doing business with post-patent manufacturers. The numbers were incredible — 75% were, at that point. Through 2006, this percentage continued to climb — from 81% in 2004 to 86% in 2006.

Even more impressively, many of these same retailers viewed post-patent products as one of the major reasons for their crop protection product business spiraling downward in terms of profit margins. “The high percentage of generic product entries is causing price erosion,” wrote many a respondent on their CropLife 100 survey forms between 2003 and 2006.

Despite this fact, retailers continued to sell an increasing number of these products to their grower-customers without fail. The reason for this boiled down to one of giving the customer what he or she wanted. “Growers are no longer necessarily asking for brand names in their crop protection choices,” said Dave Coppess, vice president of sales and marketing for Heartland Co-op, West Des Moines, IA, in a 2005 interview with CropLife. “All they really want is a product that will help them get clean fields.”

A Bump In The Road?

Based upon this growth curve — coupled with the initial estimates for overall post-patent product market share — our staff expected the 2007 CropLife 100 survey to show post-patent product market penetration nearing the 90% mark, but certainly no lower than somewhere in the 80% range.

Surprisingly, this wasn’t the case. According to data from respondents, the percentage of CropLife 100 retailers doing business with post-patent products fell significantly last year — down 20% to 66%. Furthermore, market analysts expecting post-patent products to be the equivalent of 80% of total crop protection sales were way off the mark. Based upon the CropLife 100 data, generic brands represented only 22% of crop protection product revenue in 2007 among all ranked dealerships. There were, however, several CropLife 100 retailers with post-patent product percentages in the 50% to 60% range. One retailer even indicated that 75% of its 2007 crop protection product sales were generic.

Of course, these kinds of numbers beg a simple question — is the bloom off the post-patent rose? Not to be cliché, but the answer seems to be yes and no.

On the 2007 CropLife 100 survey form, we asked retailers a couple of follow-up questions regarding their post-patent product offerings. As for why these respondents are doing business with post-patent manufacturers when they perceive these products as “negatively impacting” their bottom lines, 72% indicated their grower-customers were “demanding” generics as an alternative to basic manufacturer supplied brands. Perhaps more surprisingly, 80% of those surveyed said that post-patent products offered a better opportunity for profit than basic manufacturer brands did.

While CropLife 100 retailers seemed pleased overall with the post-patent products themselves, the same couldn’t be said for the manufacturers of these brands. According to the survey, only 48% of the respondents said they “trusted” the generic companies with whom they do business. Interestingly, this is the same percentage of respondents that ranked the basic suppliers they do work with as “solid.”

Although it wasn’t reflected by a direct question within the survey, another reason for this sharp drop in post-patent product support among 2007 CropLife 100 retailers could stem from the companies themselves. After relative stability between 2005 and 2006 in terms of which ag retailers made the rankings, 2007 saw six new companies enter the list because of mergers and consolidations among existing players. Compared to the companies that vacated the CropLife 100, virtually none of the newcomers survey forms indicated that they handled post-patent products in their operations, thus depressing the overall percentage figure.

Making A Comeback?

Moving forward, the question now centers on if the 2007 post-patent product performance is a momentary pause on the road to prosperity or a reversal of fortunes. Based upon the evidence, it could be the latter. According to the 2007 CropLife 100 survey, 83% of respondents said that despite their grower-customers asking for generic products, they preferred to sell basic manufacturer brands instead. Of this group, 36% indicated they felt “strongly” about this business position.

Coupled with this view, basic manufacturers have apparently stepped up their efforts to protect their market shares within the ag retail community. This has included offering increased support and upgraded product offerings.

In his 2005 interview with CropLife, Heartland’s Coppess foresaw this kind of scenario playing out in the years ahead. He even predicted that today’s somewhat split marketplace would occur. “The branded folks will try to protect their market share at all costs, post-patent products will keep coming, and retailers will look to improve their bottom lines,” he said. “Eventually, a balance will be achieved.”

Leave a Reply

CropLife 100 Stories

CropLife 100CHS To Build $3 Billion Fertilizer Plant In North Dakota
September 5, 2014
The fertilizer plant in Spiritwood will be the single largest investment in CHS history, as well as the single largest private investment project ever undertaken in North Dakota. Read More
CropLife 100BRANDT Acquires Lemon Ag Services
August 4, 2014
The acquisition of Lemon Ag fits BRANDT’s aggressive corporate strategy of providing superior agronomic advice and services for customers in central Illinois. Read More
CropLife 100Wilbur-Ellis To Relocate Agribusiness Division To Denver
July 16, 2014
The move Eastward will allow Wilbur-Ellis’ Agribusiness Division to be more accessible to relevant geographies and is expected to enhance communication and collaboration among the division’s nearly 3,000 employees. Read More
CropLife 100Map: Pinnacle Agriculture Holdings Acquisitions In 2014
May 29, 2014
Pinnacle Agriculture Holdings continues to expand its agricultural retail distribution business through these key acquisitions in 2014. Read More

Trending Articles

Crop InputsPlatform Specialty Products To Acquire Arysta LifeScience
October 20, 2014
Once the acquisition is complete, Platform Specialty Products will combine Arysta LifeScience with previously acquired companies Agriphar and Chemtura Crop Solutions. Read More
Seed/BiotechMonsanto Offers New Support For Ferguson, Area Communities
October 8, 2014
Monsanto Co. has committed $1 million in new support for several collaborative efforts in Ferguson, MO, and surrounding communities in North St. Louis County. Read More
Seed/BiotechUnapproved Genetically Modified Wheat Found In Montana
October 3, 2014
USDA reports that one year after discovery of Monsanto's unapproved wheat in a single Oregon field disrupted U.S. wheat export sales, the GMO wheat has again been found in Montana. Read More
Equipment2014 Product Of The Year Voting
September 19, 2014
The deadline to vote for the 2014 CropLife IRON Product of the Year is October 31. Please cast your vote today to help us determine the winner. Read More
FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More
CropLife 100CHS To Build $3 Billion Fertilizer Plant In North Dakota
September 5, 2014
The fertilizer plant in Spiritwood will be the single largest investment in CHS history, as well as the single largest private investment project ever undertaken in North Dakota. Read More

Latest News

InsecticidesValent U.S.A., MGK Form Marketing Agreement
October 24, 2014
Valent has formed an agreement with Minneapolis-based MGK to manage the marketing and sales of MGK’s crop protection line of insect control products within the U.S. beginning April 1, 2015. Read More
StewardshipFlorida’s 4R Advocate Keeps Improving
October 24, 2014
Florida farmer Alan Jones uses the 4R principles of nutrient stewardship as the core of his fertility program, which allows him to maximize production and keep costs in check. Read More
Seed/BiotechMonsanto Named One Of The World’s Best Multinational …
October 23, 2014
Monsanto ranked No. 8 in the world’s largest annual study of workplace excellence that identifies the top 25 best multinational companies in terms of workplace culture. Read More
Crop InputsArysta Hires Former Agri-Chem, CPS Employee For Delta S…
October 23, 2014
New Territory Sales Manager Mark Peel’s primary role will focus on working with growers regarding fungicides in Louisiana, Mississippi, Arkansas and Tennessee. Read More
CropLife 100GROWMARK Announces Appointments In Plant Food Division
October 22, 2014
GROWMARK, Inc. has announced the three key staff changes in its Plant Food Division. Read More
CropLife 100GROWMARK Appoints New VP Of Finance And Risk Management
October 22, 2014
Wade Mittelstadt has been named GROWMARK Vice President, Financial and Risk Mangement, effective December 1, 2014. Read More
FungicidesEPA Approves BASF In-Furrow Corn Fungicide
October 22, 2014
Field trials show Xanthion In-furrow fungicide provides more rapid emergence, extended residual control and improved seedling health than untreated crops. Read More
EquipmentAgraScout App Available At No Cost To Universities
October 21, 2014
AgraScout, a fast and easy to use mobile crop scouting app, is now available at no cost to University students, Read More
LegislationNew Farm Bill Program To Provide Relief To Farmers Affe…
October 21, 2014
The USDA has implemented a new Farm Bill initiative that will provide relief to farmers affected by severe weather, including drought. Read More
ManagementGreenfield Scholars Program Aims To Sustain Agronomy Wo…
October 21, 2014
The program encourages talented students to study agronomy, crop and soil sciences while cultivating networks to develop the necessary workforce to sustain the profession. Read More
Paul SchrimpfPrecision Ag: Taking It To The Hill
October 21, 2014
A new coalition took the good news message of precision agriculture to Washington, DC, last month. Read More
ManagementUSDA Awards $18 Million In Small Business Research Gran…
October 21, 2014
The grants will provide high quality, advanced research and development that will lead to technological innovations and solutions for American agriculture. Read More
FertilizerCF Industries Terminates Merger Discussions With Yara I…
October 21, 2014
CF Industries Holdings and Yara International have terminated their discussions regarding a potential merger of equals transaction. Read More
Seed/BiotechSyngenta Ranked A Top 10 Biotech Employer For Third tim…
October 20, 2014
Syngenta ranked in the top 10 among the world’s top biotech employers, according to an annual survey conducted by Science magazine. Read More
CropLife 100Wheat Growers Break Ground For New Facility At Kennebec
October 20, 2014
Wheat Growers has broke ground for a state-of-the-art shuttle loader grain handling, fertilizer and agronomy facility in Kennebec, SD. Read More
FertilizerVerdesian Life Sciences Signs Agreement With Los Alamos…
October 20, 2014
Verdesian Life Sciences has signed a licensing agreement with Los Alamos National Laboratory to develop and market LANL’s latest nitrogen enhancement technology for plants. Read More
MicronutrientsStoller Group Announces Groundbreaking At New Office Bu…
October 20, 2014
Jerry Stoller, founder and president of Stoller Group, announced the groundbreaking at the site of the company’s future headquarters in Read More
Crop InputsBioSafe Systems Opens New Production Facility In Nevada
October 20, 2014
BioSafe Systems has completed construction of a state-of-art production facility in Sparks, NV, for its line of activated peroxygen products. Read More